Electrical companies are facing disruption brought on by challenges from all sides: a radical change in energy mix and pricing, changes in consumption patterns, aging assets and infrastructure, and the myriad threats of climate change. But new technologies, tools, and solutions that will help electrical companies meet these and other challenges are beginning to emerge. By harnessing data to power digital transformation processes, electrical companies can extend the life and effectiveness of their assets, boost worker safety, and improve how they interact with customers.
These new opportunities couldn’t have come at a better time. To keep pace with projected GDP growth, the world needs to invest $3.7 trillion in economic network infrastructure annually through 2035, and the electrical industry alone calls for 29% of that total investment, according to the Italian Institute for International Political Studies (ISPI).
Today’s global power grids are losing value. A McKinsey analysis of 50 global utilities found that the average total cumulative return to their shareholders was only 1% from 2007 to 2017. This is an opportunity for electrical utility CIOs and CTOs need to think differently — to make more out of their existing infrastructure and be more proactive to avoid costly downtime or equipment failure.
As they move up the digital learning curve, electrical companies face both widespread strategic challenges and new, profitable pathways to meeting the world’s growing energy demands. To succeed, CIOs and CTOs must become catalysts for digital innovation in their organizations; encouraging stakeholders to adopt digital tools that bring new life to their aging infrastructures and deliver on expectations in an increasingly consumer-driven market.
Making the case for digitalization
In digital economies, decision-making is backed by data at every operational stage. As their digital journey continues, electrical companies can use data to power more robust and reliable machine-learning applications for optimization and automation, as well as human-facing applications, such as advanced visualizations and apps for both digital field workers and consumers. By maximizing their own capabilities with data, companies can sharpen their competitive edge.
In 2018, global investments in digital grid technologies, data intelligence, and digital services grew by almost 10% to $35 billion. The greatest growth areas were smart meters, grid automation equipment, and EV charging stations; the latter of which saw 60% growth, according to a study published in ISPI.
Some countries have recently completed large-scale upgrades of their digital grid technologies. Norway, for example, completed a rollout of smart meters last year to virtually all of the country’s households, an investment of more than $1 billion between 2016-18. Today, 2.6 million such meters send daily information about energy usage to a central database shared by the country’s electrical companies, which vastly simplifies planning and customer support processes.
Such transformations are creating significant value — a reduction in operating expenses of up to 25% in some cases, with other reduced costs and higher profit. Companies saw performance gains as high as 40% in areas like safety, reliability, customer satisfaction, and regulatory compliance, according to McKinsey.
Still, most utility companies have achieved only a modest level of digitalization compared to other industries. Electric companies in particular — since they face a market where consumers and businesses have increased choice in how they consume energy — have the most to gain in terms of the efficiencies by which they deliver electricity and the potential value of their digital engagement with their customers.
In addition to giving electrical companies a competitive edge, digitalization will also benefit society. For example, by automating the process through which new assets — such as wind farms — can connect to the grid, countries can speed up their transition to renewable energy sources.
Visualizing a new digital infrastructure
Now, the end-to-end digitalization found in other industrial economies — where the end user expects to be at the center of companies’ value propositions — are forcing electric companies to respond in turn. In an end-to-end paradigm, electrical companies must provide users with access to digital environments. They must also improve operational output, adopting digital management systems for the generation, transmission, and consumption of electric power.
In an evolved digital infrastructure, these investments drive efficiencies, reduce risk, lead to shorter waiting times for customers, and increase opportunities for monetization. These trends are shaping the energy sector into a new ecosystem that requires rapid transformation of companies’ business models, even while they face down deeply embedded legacy operations and IT environments.
The payoff is worth the effort — especially in a global atmosphere that calls for decarbonization and improved urban electrical infrastructure. According to ISPI:
Electrical network operators need to rapidly readjust their infrastructural assets, supporting the energy economy transformation and the building of smart cities by digitalizing their operation and processes… By integrating and optimizing distributed generation from renewable sources, storage and demand response, smart grids contribute to sustainability, facilitating the complete transformation of the energy systems, while generating opportunities for new revenues streams.
Digital operations will call for new investments in data-driven technologies, including artificial intelligence (AI), computer vision, IoT sensors, and agile approaches to improving operational and maintenance efficiencies. Despite these financial hurdles, new tools can create a culture of constant improvement that helps entities not only at both ends of the value chain, but also throughout processes as well.
Electrical companies and customers reap the benefits
In the new digital ecosystem, all participants — customers, partners, and even adjacent industries — share both standardized digital platforms and new commercial and performance benefits. Here are some of the areas where these parties will see results:
- Power system planning: New technologies will provide insights into future requirements for power generation and demand across the grid to optimize new investments, understand available capacity, utilize that capacity, and delay upgrades and reinvestments.
- Smart maintenance: New digital tools will improve planning, efficiency, and the quality of maintenance activities, all while improving worker safety.
- Production optimization: Greater understanding of power price dynamics over short- and long-term optimization horizons will enable electrical companies to ensure maximum achieved price for generation assets given their flexibility.
- Yield optimization: Monitoring actual loading, weather conditions, and prognoses for near-term load will help electrical companies improve dynamic utilization of the capacity in cables, lines, and transformers.
- Customer experience: Modern digital ecosystems increase transparency and improve performance for customers, keeping them happy, loyal, and engaged. Empowered customers will inspire new business models as companies quickly adapt to changing scenarios.
- Regulatory compliance: Data-driven insights help electrical companies create an environment of honesty with both customers and regulators, at which point they can successfully strike a balance between service, compliance, and profitability.
Adopting a new energy future
The industrial future will be shaped by those who digitalize first and best. Fortunately, barriers to digitalization are less restrictive than one might think. Electrical companies can utilize existing grid capacity to optimize assets while simultaneously becoming more dynamic. Companies’ newfound agility will actually make assets safer and more reliable, help them identify challenges and opportunities more quickly, and allow them to mobilize their organizations in response.
As mentioned, these new tools couldn’t come at a better time. Electrical companies have access to solutions that help them adapt business processes to evolving demands, but also create an evolutionary customer experience that differentiates them from competitors in a more liberalized energy economy.
This puts CIOs and CTOs in the unique position to lead the drive for digital transformation and realize the long-term benefits of their efforts. Establishing and maintaining a culture of innovation will help them create the right organizational structure, then successfully take on the unforeseeable challenges of the future.
Digitalization, distribution automation, DERMS, and asset management are all important topics at DISTRIBUTECH International. See our educational tracks and sessions here.